A few times a year, Jason Weybrecht of Spero-Smith Investment Advisers Inc. in Cleveland plays Monopoly with the children of one of his clients. “We meet to discuss how stocks and bonds work, and the importance of budgeting,” he says. “We began playing board games with them just to start talking about money. It’s important to our clients that their kids have a solid understanding of saving, spending, and planning for their future.”
While spending an afternoon with children isn’t a typical advisor’s routine, Weybrecht is just one of many advisors following a new trend in family financial planning. In fact, many advisors are taking a special interest in their clients’ offspring.
“Why would we only help our adult clients and not offer to help the people they love?” asks Charles E. Foster, II, of Blankinship & Foster, a family wealth advisory firm in Del Mar, California. “Although most clients do not have their children’s understanding of money as their first goal, it often becomes one.” Foster usually meets with older children in their teens and helps them understand money and investments as tools.
A few hundred miles down the road, Melissa Hammel is holding class for a small group of six-year-olds. Hammel, a partner with Hammel Financial Advisory Group, LLC, in Brentwood, Tennessee, spends two to three weeks each year teaching all of her clients’ children about money and how to manage it.
“With the real little kids, I’ll show them the differences between dimes and nickels and explain concepts like value and worth,” she says. “I’ll also buy a few toys and explain to them that each toy has a cost and how [to buy] more expensive ones [you] need more money.”
For the older children, Hammel goes over these same concepts at higher levels. “I talk to the high school kids about saving for the prom or for a computer,” she explains. Most of their parents have already taken care of the their college savings, so she says she tries to relate to them on more familiar terms. And for the few college students she works with, Hammel helps them put together their own savings plans, create goals, and understand compounding and credit.
This shift in the financial planning industry toward including all family members in the planning process is something some advisors agree is a necessity for everyone involved. “In many cases if you do not build a relationship with clients’ children, all of your work and planning will walk out the door once your client dies,” Weybrecht says. “I think people are concerned that their children will not understand how to manage or maintain their wealth when they have to.”
In the case of the seven-, nine-, and twelve-year-old siblings he meets with, Weybrecht has created a fake money portfolio for the oldest to work through and has just introduced stock and bond concepts. The younger kids are still being taught about living within their means, he says. All of this is done in hopes that his clients’ children will be able to take care of themselves when the time comes.
On a similar note, A. Todd Black of Dogwood Capital Management, Inc., in Cumming, Georgia, believes wealth management is all about being the family advisor. “It will be much more common to see family planning in the future than it was in the past, because our profession has evolved from a product-focused industry to a relationship-focused industry, at least as far as the fee-only movement is concerned,” he says. “It depends on the personality, motives, and values of the advisor. What motivates him or her to be a financial planner? I love my clients. They are all my friends. I enjoy seeing them succeed and I do a lot of coaching. I get a deep sense of personal fulfillment from helping them, and I am intentionally positioning myself in this role. My goal is for my firm to impact their lives in a positive way as long as I am here, and long after I am gone.”
Hammel agrees, but says there are some things you have to take into consideration before including an entire family in the planning process. “First, working with a whole family is not always appropriate right away, but the big thing is to develop a relationship with their kid,” she says. “I’ve had clients mention that they would like a connection to be there when [their children] start working.” As a planner, Hammel adds that she’s not just there to manage investments, but to help her clients with any aspect of life, should they need it.
So when is it appropriate to begin teaching your clients’ kids, or begin discussing with your clients how to teach their children, about money? Black says he thinks it’s best to wait until the child has a job and is earning money of his own. “If they earn $500 in a summer working at McDonald’s or for Mom and Dad, they need to open a Roth IRA and put $50 in it,” he says. “The earlier this habit starts the better. I also believe it is important that they put their money in their Roth, and not Mom and Dad’s. I point out to my clients that their child’s earned money is somehow worth more than the money Mom and Dad provide, and the life lesson is much more compelling.”
Foster, on the other hand, argues that the earlier you begin, the better.
If you would like to begin working with clients’ children, there is some help out there. On the Web, you can consult: Alliance for Investor Education, at www.investoreducation.org; the American Savings Education Council, at www.asec.org; and the Jump$tart Coalition for Personal Finance Literacy, at www.jumpstart.org. Help is also available through the National Endowment for Financial Education (NEFE) at www.nefe.org, 303-741-6333, and the Boys and Girls Clubs of America at www.bgca.org, 404-487-5700.